The Ivorian government has created a new regulatory body for the cotton and cashew sectors, the Conseil du Coton et de l?Anacarde (CCA), which will start operations in six months.


The CCA replaces the previous regulator, ARECA, and has the prime objective of enforcing a minimum 60% CIF price for farmers of cotton and cashew nuts, the two main cash crops of northern C?te d?Ivoire.


The CCA will also oversee plans to double annual production of seed cotton to 600,000 MT by 2016. C?te d?Ivoire has struggled to regain its status as one of the leading cotton producers in the CFA franc zone, following years of political instability and low cotton prices which led to farmers abandoning the crop, and the reforms are a welcome initiative to rebuild the sector after years of mismanaged liberalization.


However, ginners have raised concerns over the introduction of mandatory zoning which will restrict them to purchasing seed cotton within defined areas. Under the new regulations, the largest areas will be granted to ginners with the largest capacity, which could limit competitiveness and curb total ginning output.


Some farmers have voiced opposition to zoning, preferring to sell their crop on the market. Given that seed cotton production surged from 140,000 MT in 2012 to 360,000 in 2013, the government?s target of 600,000 MT is achievable, but it will depend on favourable weather and stemming the exodus of farmers to more profitable cash crops, such as maize.


Benin government in standoff with cotton ginners

The government of Benin and the country?s ginning companies remain embroiled in a payments dispute resulting from the state?s take-over of the cotton sector last year. Under the state?s management of the sector, ginning companies are paid XOF50,083/MT for ginned cotton, which covers only 63% of their costs.


Despite promises to review the payment structure in response to ginners? concerns over mounting losses, this cost structure remains in place this season. Moreover, for the past six months ginners have been demanding back payments worth XOF12bn and reimbursement of XOF2.5bn of debts they incurred under last season?s pricing system.


Although the country?s leading ginners ? represented by the Conseil National des Egreneurs de Coton de Benin (CNEC) ? have denied reports that they will boycott the 2013/2014 season and refuse to pay the minimum price of XOF280/kg for seed cotton, they have repeated their demands to opt out of the government?s management of the ginning sector.


Given their mounting cash-flow problems and unprofitable operations, ginners will be hard pressed to meet production targets and increase ginning capacity, undermining government plans to increase cotton production in the medium term.


The government is also likely to fall short of its seed cotton output target of 400,000 MT for the 2013/2014 season, owing to the slow distribution of inputs at the beginning of the season and the poor quality of subsidized fertilizers.


Tanzanian production slumps in 2012/13

Tanzania ?East Africa?s largest cotton producer ? is expected to see seed cotton production for the 2012/2013 season fall by a third, to 235,825 MT, following output of 355,000 MT the previous season.


According to the Tanzania Cotton Board (TCB), the slump has resulted from significantly lower prices, averaging TZS660/kg compared with TZS1,100/kg last season, which pushed many farmers to abandon cotton for more profitable food crops.


In addition, producers have struggled to secure inputs under the contract farming system which has now been suspended by the government. For the 2013/2014 season, TCB is targeting production of 250,000 MT following the distribution of improved seed varieties which will be sold to farmers at the subsidized price of TZS1,200/kg.


Tanzania?s cotton sector will also receive a boost from the launch of the second phase of the Competitive African Cotton Initiative (COMPACI). A pan- African initiative, COMPACI aims to develop the production capacity of 650,000 cotton farmers in Benin, Burkina Faso, C?te d’Ivoire, Cameroon, Tanzania, Zambia and Zimbabwe.


In Tanzania, the programme will focus on improving farmers? productivity and crop quality by promoting agricultural best practice, distributing inputs, increasing the area under cotton cultivation and encouraging farmers to diversify into other cash crops.


Cotton price outlook

World cotton prices slumped in October, losing 6.6% of their value to end the month at 85.4 US cents/lb, in the process wiping out most of the gains made this year.

Markets have been spooked by a slump in Chinese imports for its strategic stockpile ? a factor that has buoyed prices over the past two years ? and growing expectations of bumper crops in India and the USA. With the prospect of a third consecutive global surplus in 2013/14, prices are likely to weaken further over the coming months, driving them below their ten-year average of 79 US cents/lb.

Source Ecobank Research

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